Analysis: Nexen deal should get approved by Ottawa
By David Ljunggren
OTTAWA (Reuters) - A friendly $15.1 billion Chinese bid for a big Canadian energy company gels with government pleas for foreign money to develop the costly oil sands of northern Alberta -- a possible sign that the deal could win Ottawa's approval.
The Canadian government said only that it would review state oil company CNOOC's (0883.HK: Quote) bid for Nexen Inc NXY.TO, based on its laws on foreign investment. But lawyers, analysts and insiders say there are good reasons for the deal to go ahead, and few reasons to block it.
"It so far appears to be a mutual two-way street. Canada has made it clear that it is looking for Chinese investment ... And China is now in a way reciprocating that interest by investing in a Canadian company," said Oliver Borgers of law firm McCarthy Tétrault LLP in Toronto.
"It appears to want to do a lot for that Canadian company in terms of increasing its size, its footprint, its presence globally, all of the things that would be music to the ears of the Canadian government," said Borgers, who specializes in antitrust law and foreign investment reviews.
Approval of the deal would help restore a Canadian foreign investment climate that the government dented in 2010 when it rejected a $39 billion attempt by Australian miner BHP Billiton Ltd (BHP.AX: Quote) to buy fertilizer maker Potash Corp (POT.TO: Quote). The Conservative government said the Potash takeover would not bring a net benefit to Canada and it vetoed the deal.
But Potash Corp was a huge player - and a big employer - in the politically significant province of Saskatchewan, while Nexen's assets are far more widely distributed around the world.
Unlike the Potash offer, in which Saskatchewan's premier voiced strong opposition, contributing to its demise, Nexen's home base of Alberta appeared enthused by CNOOC's play for the company, saying its oil sands assets require major investments.
"Today's potential transaction is further evidence of the vital importance of Alberta's oil sands to meet global energy demand," Alberta Energy Minister Ken Hughes said in a statement. "Foreign investment benefits Albertans, and Canadians, putting Canadian firms in a better position to compete globally." Continued...